Lower costs of materials could aid styrene maker

BOTTOM-LINE BONANZA?With Chinese production of raw materials set to surge, analysts said Taiwan Styrene Monomer Corp might win big in the year’s second half

By Camaron Kao / Staff reporter

Taiwan Styrene Monomer Corp (台苯), which makes the polystyrene precursor and component of ABS thermoplastic resins, is expected to post a surge in operating profit in the second half of this year over the first half as prices for ethylene and benzene drop, Jih Sun Securities Investment Consulting Co (日盛投顧) said.

The bank expects the firm’s operating profit to grow from NT$142 million (US$4.7 million) in the first two quarters this year to NT$433 million in the second half, Jih Sun analyst Max Chan (詹明豐) said in the bank’s report issued on Thursday.

“The production of benzene should rise by 2.7 million tonnes a year in China starting in the second half of this year and annual maintenance for ethylene makers should be completed,” Chan said. “As a result, the gross margin for making styrene monomer would rise to between US$70 and US$120 per tonne on average from between US$50 to US$100 per tonne this quarter.”

Taiwan Styrene Monomer has the capacity to make 350,000 tonnes of styrene monomer a year, and sales of the product accounted for 95.7 percent of its revenue of NT$21.76 billion last year, Chan said.

In terms of net profit, Taiwan Styrene Monomer could register NT$222 million next quarter and NT$168 million in the fourth quarter this year, Chan said.

However, the figures would be lower than the NT$357 million this quarter, he added.

Last quarter, the company posted profit of NT$12.31 million, down 42.66 percent from NT$21.47 million a year ago and 95.84 percent from NT$295.59 million a quarter ago, according to the company’s filing to the Taiwan Stock Exchange.

“The demand for styrene monomer was low in China last quarter because of the Lunar New Year holidays,” Chan said. “The difficulty to obtain funds in China stopped the company’s clients from increasing their purchases.”

The severe weather condition in the US last quarter also dragged down the demand for styrene monomer, Chan added.

Throughout this year, the company is likely to report profit of NT$759 million, or NT$1.51 per share, which is still lower than NT$1.09 billion, or NT$2.16 per share, last year, when the company swing to the black on the back of larger margin for styrene monomer.